Mauro Products distributes a single product, a woven basket whose selling price is $24 per unit and whose variable expense is $18 per unit. The company’s monthly fixed expense is $12,600.
Required:
1. Calculate the company’s break-even point in unit sales.
2. Calculate the company’s break-even point in dollar sales. (Do not round intermediate calculations.)
3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales? (Do not round intermediate calculations.)
Requirement 1:
Break-even point in units sales = Fixed cost ÷ (Selling price per unit - Variable expense per unit)
= $12,600 ÷ ($24-$18)
= $12,600 ÷ $6
= 2,100 units
Requirement 2:
Break-even point in dollar sales = Break-even point in unit sales x Selling price per unit
= 2,100 x $24
= $50,400
Requirement 3:
New Break-even point in units sales = Fixed cost ÷ (Selling price per unit - Variable expense per unit)
= ($12,600+$600) ÷ ($24-$18)
= $13,200 ÷ $6
= 2,200 units
New Break-even point in dollar sales = New Break-even point in unit sales x Selling price per unit
= 2,200 x $24
= $52,800
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